Issue 21 March 2004 (Large Enterprises Update )

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Corporates Contact - 2004

Issue 21 March 2004

New Group Manager, Corporates
Standard practice statement PRC-101:
Resident withholding tax exemption certificates
A new image, the same return
New option for taxing specified superannuation contributions
Trans-Tasman imputation election forms
2003 income tax returns due
Reminders
End-of-year issues for employers
New and recently-updated publications

New Group Manager, Corporates

We are delighted to announce the appointment of Spyros Papageorgiou as Group Manager, Corporates.

Spyros brings to the department a wealth of tax and commercial experience. He has held senior tax positions with several large groups in New Zealand, Australia and England, including the Bank of New Zealand and BP. He has also worked in an accounting firm, after originally starting his working career with Inland Revenue.

He has been a member of the Corporate Taxpayer Group, and holds a Bachelor of Commerce and Administration and is a chartered accountant.

"I am excited about the appointment, and believe I can add a lot to the relationship between the department, industry and tax processing issues from experiences previously gained", says Spyros.

Currently Spyros is coming up to speed on issues in the department and will be a contributor to future Corporates Contact editions.

Standard practice statement PRC-101: Tax payments - when received in time

This standard practice statement (SPS) sets out the Commissioner's practice for accepting tax payments as having been made in time and includes:

payments by post
electronic payments
physical delivery
postdated cheques
weekends and public holidays
tax pooling, and
tax transfers.

The SPS applies from 19 December 2003.

You'll find the SPS in the Tax Information Bulletin, Vol 15, No 12 (December 2003).

Resident withholding tax exemption certificates

Corporates Segment may issue limited RWT exemption certificates (for periods to the following 31 March, not the company's balance date) where exemption is requested on the grounds of:

tax losses (or an expected refund of over $500 RWT), or
estimated income over $2 million.

Please note that evidence of income should accompany applications for exemption under these categories. The Application for exemption from resident withholding tax on interest and dividends (IR451) is available from our website.

Exemption certificates with no end-date are issued for:

income or group income over $2 million (available even to new companies within a group, providing the group has established income of over $2 million), and
specific types of taxpayers, such as those in the banking and insurance and crown sectors.

In addition to the queries on the above, we also receive a number of enquiries about missing or lost exemption certificates. Please note that replacement certificates are produced and issued through our correspondence system and take 7 to 10 days to be generated and posted.

Therefore, if you or your group of companies may be involved in a sale, investment or other financial transaction involving considerable sums of money, it would be wise to check now that you (or your tax agent or legal advisor) hold a copy of your current certificate of exemption. If not, please contact us to request a copy, before the matter becomes urgent. You can phone your Business Services account manager or our general enquiry line 0800 443 773.

A new image, the same return

This year you will notice something different about the way your IR 4 company income tax return looks. We have replaced the panels you fill in with individual boxes.

We have made these changes because we are introducing new imaging technology that will speed up the processing of your return.

Imaging technology relies on the clarity of each character entered on the return. You can help ensure faster processing by noting the following:

Individual boxes have replaced the old data entry fields. Only one character can be entered in each box.
If a figure is a loss, instead of showing it in brackets, please put a minus sign in the final box of the keypoint. Where the figure can only be a negative, for example, a loss brought forward, the minus sign has been preprinted on the return.
Please don't write anything outside of the boxes.
If you need to provide additional information, please do so on a separate piece of paper, clearly indicating the section of the return it relates to, and attach it to the return.

If you require a replacement return you can order one by phoning INFOexpress on 0800 257 773. If you have any questions about the new look return please phone us on 0800 443 773.

New option for taxing specified superannuation contributions

Contributions by employers to superannuation funds for the benefit of their employees are generally subject to specified superannuation contribution withholding tax (SSCWT) at a flat rate of 33%. This flat rate over-taxes the retirement savings of employees earning less than $38,000.

To prevent this, there will be a new option available from 1 April 2004 for taxing specified superannuation contributions. This new option allows a lower tax rate to be applied to employer contributions for some employees.

How does it work?

The new option is voluntary and can be used at the discretion of the employer. The rate of SSCWT to be deducted from current year contributions will be based on the annual salary or wages paid to the employee in the previous tax year. The rate of SSCWT to be deducted is calculated at the start of each year that contributions will be made.

Under this option the SSCWT rate for employees with salary or wages in the previous income year totalling:

less than $9,500, will be 15%
more than $9,500 and not more than $38,000, will be 21%
over $38,000, will be 33%.

If an employee was not employed by an employer for all of the previous tax year, the employer can estimate the total amount of salary or wages that the employee will earn in the year to come and determine the appropriate SSCWT rate from that estimate.

There is no requirement to adjust the rate during any year if an employee's salary or wages increase or decrease. If their salary or wages do change during the year affecting the applicable rate, a new rate will apply from the following year.

If an employer does not choose to use the new option for determining individual SSCWT rates, then the existing options, as outlined in the Employer's guide (IR335), apply.

More detailed information about the new option can be found in Tax Information Bulletin, Vol 16, No 1 (February 2004).

If you require any further information about this please contact us on 0800 443 553.

Trans-Tasman imputation election forms

Since the enactment of the trans-Tasman imputation legislation in November 2003, the trans-Tasman imputation election forms have become available.

Trans-Tasman imputation election form (IR488)

Use this form for Australian companies that wish to elect to maintain a New Zealand imputation credit account (ICA).

You can use the electronic election form or print the paper version from our website. Due to the expected low usage of this form, it won't be available through StationeryXpress or INFOexpress.

Election to form an imputation group (IR473)

Use this form to provide us with written notice of groups of companies that wish to elect to form an imputation group. You can print the form from our website or order one through StationeryXpress or by phoning INFOexpress on 0800 257 773.

Deadline for election

For either type of election to apply for the 2004 imputation year (from 1 April 2003 to 31 March 2004), we must have received the election form by 31 March 2004.

Dividends received from electing Australian companies in the 2004 year

If you have New Zealand clients who have received dividends from electing Australian companies during the 2004 income year, the dividends may have New Zealand imputation credits attached. These credits can be claimed (subject to the usual imputation limitations) in their 2004 income tax return. You may also like to consider any potential effect on your clients' provisional tax liabilities for the 2004 year, bearing in mind the interest provisions that apply to any provisional tax estimations.

2003 income tax returns due

For those of you with a tax agent taking care of your income tax returns, Wednesday 31 March 2004 is the last day for 2003 returns to be filed under Inland Revenue's extension-of-time arrangements. If your return results in a refund and it is not filed by 31 March 2004, you will need to file an interim IR 4J for 2005 in order to have that refund released.

If you do not file your 2003 return by 31 March and incur a late filing penalty for 2003, you will need to make arrangements for your 2003 and 2004 returns to be filed by your first provisional tax due date if you want your extension-of-time provisions to be reinstated for 2005 returns.

Please note that late filing penalties are graduated according to income.

Net income	Penalty
Less than $100,000	$50
$100,000 to $1 million	$250
More than $1 million	$500

If you have any concerns about your 2003-2004 returns, please phone your Business Services account manager or our enquiry line 0800 443 773.

Reminders

End-of-year income tax

If you are the client of a tax agent with a balance date between March and September (inclusive), your end-of-year income tax for the year ending 31 March 2003 is due on 7 April 2004.

Imputation account balances

With 31 March 2004 approaching, now is a good time to check company imputation account balances.

If your company imputation credit account balance is in debit at 31 March you will be required to pay further income tax equal to the debit balance and will also be charged imputation penalty tax.

The penalty tax can be avoided by paying income tax by 31 March, sufficient to clear the imputation account debit balance.

End-of-year issues for employers

The financial year has all but finished for payment of wages and salaries to your staff. We will shortly be using the employer monthly schedule information you have provided to issue summaries of earnings and personal tax summaries for the 2004 year. The total gross wages recorded by us is also transferred to ACC for your ACC invoice later in the year.

All wages and salaries paid or credited to staff on or by 31 March 2004 must be included in the ir-File for March or for the 2004 financial year. Payments are due on 5 April 2004, or if you are a small employer 20 April 2004.

So are these records correct?

To avoid queries from your staff it may pay to consider the following before your last return and payment for the year.

Are all withholding tax payments, directors' fees and redundancy payments recorded as earnings not liable for ACC?
Have all earnings been recorded against an employee's IRD number?
Negative amounts cannot be included in employer monthly schedules. If you need to make a correction for a staff member you will need to complete an IR 344 form for the month the adjustment relates to.
Employer monthly schedule amendments (IR344).
Use this form to make changes to employer monthly schedules that have been filed. This is the updated form that you need to complete. If you have old forms in stock please destroy them and use this form which is available on our website. You can order them through StationeryXpress or by phoning INFOexpress on 0800 257 773.
Likewise, if the adjustment results in tax to pay, please indicate when payment was made, including penalties and interest.
If your company ir-Files its own employer monthly schedules, please check that the final figures on them reconcile with the payments made, and IR345 or IR346 forms filed, before filing it through the internet. Please contact us if adjustments do need to be made.

Alternatively, if you use a payroll bureau to ir-File, check the employer monthly schedule reports against your payments and IR345 or IR346 forms. You will know immediately when something is wrong. 31 March is a busy time for all employers but please remember that the final ir-File is due on Monday 5 April, or if you are a small employer Tuesday 20 April.
The amounts returned on your IR 345 or IR 346 (if you have SSCWT liability) should always reflect the actual liability and deductions from your employees for that pay period. If you want to make an adjustment, for example to take into account a credit held in a previous period, please attach a separate note and adjust your payment only.
Any penalties charged are calculated on the amounts shown on your IR 345 or IR 346 less the payments received on time. If you have short paid and you pay the amount due within seven calendar days from the due date, you will incur an initial late payment penalty of 1%. If you still haven't paid after seven days, an additional 4% late payment penalty will also be charged.
Please remember that adjustments for the 2004 year cannot be made on employer monthly schedules, or IR345 or IR346 forms filed for April 2004 or subsequent months (the 2005 year).
Please advise us of all adjustments or corrections for the period 1 April 2003 to 31 March 2004 by 28 April 2004.

If you want to check your gross and/or PAYE year-to-date figures, please phone INFOexpress on 0800 257 777, your Business Services account manager or our enquiry line on 0800 443 773.

New and recently-updated publications

The following publications are available from our website or they can be ordered through INFOexpress.

Provisional tax (IR289)
Tells you what provisional tax is, and how and when it must be paid.
Employer monthly schedule amendments (IR344)
This form is used to make changes to employer monthly schedules that have been filed.
Making payments (IR584)
Explains how to fill in Inland Revenue's various payment forms.
Note: Part 5 - Overseas payments if making payments from overseas.
Employer obligations: Smart business quick reference summary sheet (IR322)
This briefly explains the tax obligations of an employer.
Non-resident withholding tax (NRWT) rates and country codes (IR290)
An information sheet with NRWT rates for double tax agreement countries.
Gift duty - A guide for legal and tax practitioners (IR195)
Written for tax and legal practitioners to help them understand the obligations of gift transactions.
Grants and subsidies (IR249)
Tax responsibilities for organisations that receive a grant or subsidy.
Trans-Tasman imputation election form (IR488)
Use this form if you are an Australian company wanting to elect to maintain a New Zealand imputation credit account. An electronic version of this form is also available.
Election to form an imputation group (IR473)
Use this form to provide written notice that a group of companies wants to elect to form an imputation group